The economic illiterates in the press sometimes say the fight in Europe is between austerity and Keynesianism, but that’s not accurate. It’s really a battle between those who think big government should be financed by taxes and those who think big government should be funded by taxes and debt.

The good news is that some people understand the real problem. The bad news is that they generally don’t live in Europe. Writing for the Australian, Professor Judith Sloan cites the Rahn Curve as she explains the need to reduce the size and scope of the public sector.

The real question that a number of European and other countries should be asking themselves is this: what should be the role of government in terms of providing an environment for economic prosperity and security? There is absolutely no doubt that the size of the public sector and the intrusion of government have grown to excessive proportions in a number of these countries. A pervading sense of entitlement – on the part of retirees, welfare recipients, parents, university students, public servants and others – has been encouraged by these governments, but now threatens to block reform. …What is required is a complete rethink of the role of government. …According to the Rahn curve, the rate of economic growth initially increases with government spending (as a proportion of gross domestic product). Establishing and funding a quality judicial system, defending a country, ensuring the safety of citizens, funding (but not necessarily providing) some basic services: these are legitimate functions of government. But beyond a certain point (about 20-25 per cent of GDP) long-term economic growth tends to fall as government spending rises. This is the zone – well above 25 per cent in most instances – in which EU countries find themselves. …There are a number of reasons why the size of government really matters. After all, government spending has to be paid for by taxes, and almost all taxes reduce rewards for effort. …Moreover, government spending is often not subject to rigorous cost-benefit analysis in the same way private spending is.

To be fair, some people in Europe understand this issue, including economists at the European Central Bank who recently produced a study finding that, “…using a long time span running from 1970-2008, and employing different proxies for government size… Our results show a significant negative effect of the size of government on growth.”

And Swedish economists also have acknowledged the negative relationship between government spending and economic performance, writing that, “…there is a negative correlation between total government size and growth. It appears fair to say that an increase in total government size of ten percentage points in tax revenue or expenditure as a share of GDP is on average associated with an annual lower growth rate of between one-half and one percentage point.”

But these are lonely voices in Europe.

I’ve also weighed in on the topic from this side of the Atlantic, having produced this paper when I worked at the Heritage Foundation, and I also narrated this video for the Center for Freedom and Prosperity.

As a human being, though, my primary concern is the way redistribution saps the spirit of self reliance and traps people into lives of dependency. That’s the very first point I make in this debate on CNBC.

By the way, my opponent in the debate is Jared Bernstein, who is infamous for being the co-author of the Obama Administration claim that enacting the s0-called stimulus would keep the unemployment rate from rising above 8 percent.